What is a DU and Why Do Home Sellers Ask to See a Buyer’s DU?
Putting a home into escrow these days is only the beginning, the truly difficult part is getting that home to close when the buyer is obtaining financing; sellers deserve to know the buyer’s qualifications. The pre-qualification letters or those parading as preapproval letters are a start, but they are not the “be all and end all” for buyer qualifications. It means a buyer has contacted a lender to discuss income, credit and debt. It does not mean that income, credit nor debt has been verified. That’s the kicker.
What’s a seller to do? A seller can ask the buyer’s lender to deliver a DU. What is a DU? That’s short for desktop underwriter. Now, you would think that most lenders would automatically run a DU on borrowers, but they do not. How do I know that piece of trivia? Because 9 times out of 10 when I ask for a DU — no, make that 10 times out of 10 — I get a document dated today. I can’t recall ever receiving a DU dated a few days back.
What is a DU to you? A DU shows debt ratios — both front end and back end — meaning the percentage of income to the mortgage payment and the percentage of all debts, including the mortgage, against income. Those inching toward 50% are red flags. It also shows creditors, unpaid balances and FICO scores.
Sometimes we will receive a DU with all of the pertinent information blackened out. Sometimes, lenders send only the front page. Sometimes they don’t send a DU at all but deliver another credit picture with more lenient scoring attributes, especially for those with fewer than 2 years on the job. And we often hear the words “our mutual client” from the mortgage lender. I want to say stop with the lingo and salesmanship. The difference, of course, is the buyer is a client to the Sacramento Realtor but the borrower is typically a customer instead to the mortgage lender.
Mortgage lenders, just like real estate agents, come in all shapes, sizes, experience levels and ways of doing business. If a buyer gets a difficult mortgage lender, one who doesn’t want to cooperate with the seller and the listing agent, it doesn’t fare well for the buyer. That’s one of the reasons why some buyers are not buying a home today.